Wednesday, September 9, 2009

Are Credit Unions True to Their Mission?

The National Community Reinvestment Coalition (NCRC) released on September 8 a new report on the performance of credit unions in serving people of modest means. According to the NCRC study, “large credit unions do not serve people of modest means as well as mainstream banks, which must comply with the requirements of the Community Reinvestment Act (CRA). NCRC’s national analysis of the most recent home loan data for the years 2005 through 2007 reveals that banks perform better than credit unions on 65 percent of fair lending indicators in home purchase, refinance, and home improvement lending.”

Moreover, NCRC found that Massachusetts state-chartered credit unions, which are covered by CRA, outperformed on fair lending indicators CRA-exempt credit unions with a federal charter that operate in Massachusetts.

The NCRC study concludes that CRA should be expanded to large credit unions, because NCUA has failed to meaningfully measure credit union service to people of modest means. NCUA instead has adopted a defensive posture debating the meaning of credit unions’ public mission of serving people of modest means.

Additionally, the report states that CRA would be a boon for smaller credit unions, because larger credit unions would be encouraged to increase their level of deposits and investments in community development credit unions and low-income credit unions, which are dedicated to serving low-income people and neighborhoods.


  1. One would hope that if Congress burdens credit unions with this bogus law (which banks are trying to get from by the way), that credit unions would have access to the government money in the CDFI fund like banks and given authority to invest in community loan funds and other projects in the similar way that banks have the authority to invest in showing their efforts to a good CRA rating. If credit unions are stuck with this bank law, credit unions should have the SAME authorities as banks in this area!!!!

  2. The study only pulls data from financial institutions larger than $36M, which automatically excludes 66% of the credit union industry. Further, it ignores the majority of credit unions that were chartered specifically to serve low-income, underbanked, and unbanked populations. These ratios are comparable to the make-up of credit unions in Massachusetts.

    Further, as far as I can tell, the study tracked ONLY mortgage lending. Only about half of credit unions are mortgage lenders, and a much smaller portion engage in real estate lending comparable to the rest of their loan portfolio. I don't see where this is accounted for.

    This study relies on a non-representative sample to draw unjustified conclusions.



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